Mention that you do “Consumer tech” as a startup founder and you’d be limiting your funding options to one third of the venture capital funds (in Israel that figure is probably closer to 10%). Until now, consumer tech was perceived as a risky binary investment. B2C founders are surely no strangers to the adage ‘Consumer is hard’ – it’s not just the scarcity of funding that is challenging: consumer taste is fickle and competition includes most of the tech giants. But change seems to be brewing in the B2C space, powered by the fast advancements in AI and generative AI.
Consumer habits are changing – from search to LLMs
Consumers are increasingly turning to LLMs for direct answers and generated content (or to Google’s ‘AI summaries’), which is impacting the traditional search journey and leading to a strong decrease in clicks to external websites for certain types of queries, particularly informational ones. Gartner predicted in 2024 that traditional search engine volume could drop 25% by 2026 due to users favoring AI chatbots and virtual agents. Digiday reported conversations with media executives, with one publisher seeing a more than 50% decline in its search referral traffic since AI Overviews rolled out last year.
The integration of AI and generative AI is radically transforming how consumers interact with technology, potentially leading to a wave of innovative products and services. From delivering hyper-personalized experiences at scale to enabling new forms of content creation and consumption, AI is addressing existing consumer needs in novel ways and unlocking entirely new behaviors. This evolution is captured by Rex Woodbury of Daybreak, who asserts that “Consumer is being reborn with AI, and the application layer is just getting started”. This renewed dynamism suggests that investors might be wise to re-evaluate the consumer landscape in 2025.
In addition to search, shopping and customer support are changing too. Conversational commerce is rising with AI chatbots and voice assistants becoming integral to customer journeys. Personalisation is increasing across the board. Users are getting used to being shown relevant content recommended algorithmically, influenced by Spotifty, Youtube, Tiktok and others. And there’s of course content creation, which is being massively transformed by generative AI: writing, creating images, video, audio or music are now possible and mostly free with a prompt. Perhaps the most powerful content creation of all, which is growing in popularity is coding, catapulting companies like Lovable which hit $17M in annualised recurring revenue in February 2025, up from $7M at the end of 2024.
The automation of coding is also creating a new trend: vibe coding. A quarter of the startups in the latest YC batch have codebases that are 95% AI generated. As the barriers to bring products to life drops almost to an idea, it’s safe to expect more consumer tech and apps are about to come.
Attractive Consumer Opportunities in 2025 and Beyond
While there hasn’t been a blockbuster IPO for consumer tech companies (mobile apps, B2C model startups) that matches the scale of Uber, Airbnb, Roblox, DoorDash, or Unity over the past 5 years, it feels like the momentum for consumer tech is rapidly changing. AI’s potential to drive personalised experiences, new business models, and data-driven insights is making the consumer space an attractive investment target once again.
But don’t just take it from me. Here are what some of the leading VCs have recently said about the attractiveness in the past 6 months:
In their recent ranking of the top 100 consumer AI startups, A16Z mapped the most attractive categories in consumer tech from a revenue perspective.
NFX argues that in 2025, the consumer window has finally reopened due to advances in AI. This new consumer wave is not just a revival but a revolution, bringing whole new ways of thinking about how consumers interact with technology, each other, and AI agents. AI enables new consumer behaviours, such as AI gathering and summarising information, voice interaction, and interaction with AI Agents and bots.
Bessemer published earlier this month that ‘Consumer is at a tipping point’ due to the decreasing model costs, advancements in multimodal and real-time models and the rise of sophisticated AI agents like OpenAI’s ‘Operator’ which leverages ChatGPT’s reasoning models to take actions in the browser on behalf of users. These factors collectively pave the way for a new wave of AI-native consumer products and experiences in areas like services (copilots for life administration, travel planning, financial advice, and more), Next-gen marketplaces, Social experiences & generative gaming and content creation & productivity tools for consumers. The potential is HUGE.
Primary Ventures polled a number of VCs and zoomed in on several key areas for consumer AI startups, showcasing opportunities in enabling human-like interaction through personalised communication and companionship tools, improving content creation and creativity with AI-powered tools for various media formats, providing small business and gig economy co-pilots for automation and productivity enhancement, upleveling entertainment, play, and education through personalised and interactive experiences, and bolstering commerce via personalised shopping and product discovery. Take a look at the summary in gallery below.
And it’s not just the potential that is huge, it’s also the outcomes. To showcase the outcome size of consumer bets (when they work) Rex Woodbury, the founder of Daybreak Ventures, shared what would $1M investment in the large consumer IPOs would have been worth today.
Last year I published on VC Cafe an analysis of Enterprise vs. Consumer outcomes (created by Sapphire Ventures). It turns out that when consumer startups get to scale (series B and up), they go public at a 13% higher rate than enterprise companies, their IPOs tend to be larger, and they offer better growth rates and profit margins at IPO. Also, according to Forerunner Ventures, 62% of consumer companies that went public, exceeded the ‘Rule of 40‘ – the sum of their revenue growth rate and profit margins were above 40%.
Challenges in the Horizon?
Despite the renewed potential offered by AI, consumer startups still need to overcome significant challenges.
- High User Acquisition Costs: The landscape for acquiring new users has become increasingly complex and expensive. The flattening of the mobile adoption curve and Apple’s deprecation of its Identifier for Advertisers (IDFA) have elevated customer acquisition costs significantly. Few free growth channels remain, and incumbents often own or clog the major avenues. Gaming founders know this challenge well.
- App Store Fees: For consumer AI applications distributed through mobile app stores, the fees imposed by these platforms can significantly impact profitability and sustainability. While the Epic vs. Apple lawsuit outcome means that users can use alternative ‘app stores’, the majority of downloads still take place of the iOS App store and Google Play. These costs represent an ongoing tax on revenue, requiring careful consideration in business model design.
- Commoditisation of AI Features: this is frankly also a challenge for B2B startups. The rapid advancements in AI mean that features that once provided a competitive edge can quickly become commoditised. This is especially true for ‘GPT Wrappers’ that provide their AI features by leveraging a third party API.
The example of photo editing apps is pertinent; what was once a novelty driven by specialised algorithms is now readily available in numerous applications, often as a basic feature.
What will it take for founders to win in consumer?
At Remagine Ventures, about half of our investments are in B2C startups and even when we invest in B2B it’s largely in consumer areas like gaming, commerce, search, creator economy etc. Like with any startup, there’s no silver bullet when it comes to success. We’ve seen hundreds of consumer startups over the years and have come to appreciate the little things that make a pitch stand out in consumer tech.
Below are a few characteristics that we look for when evaluating consumer tech investments at Remagine Ventures:
- Strong Team with focus on execution: The consumer space is highly competitive, demanding excellence in all aspects, including design, marketing, community building, PR, and growth. It doesn’t all have to be there on day one, but founders should be able to show that the can attract that top talent. Speed is also critical. I’ve seen many founders that don’t have a CTO and outsourced development. That’s ok perhaps for the bootstrapped stage, but will have to change before you can raise the pre-seed round.
- Be product obsessed: Success in this reopened consumer window will require being at the cutting edge of AI, being flexible, and being excellent in all aspects of building a consumer business.
- Get creative with distribution, have a content strategy: a deep understanding of growth, including A/B testing and constant iteration, is essential. The key is to unlock organic demand available via social networks (primarily short form video like Youtube Shorts, TikTok and Instagram Reels)
- Create Defensibility: Consumer AI startups will need to focus on building unique value propositions, potentially through proprietary data, network effects, or deeply integrated user experiences, to avoid being outcompeted by the proliferation of similar AI capabilities. If you can, collect and use your own user data to your advantage.
- Focus on Creating a Standout User Experiences: Success requires developing products that dramatically outperform competitors in value, cost, usability, and user satisfaction. In today’s AI landscape, this means moving beyond basic text interfaces to leverage AI for innovative features and engagement mechanics that drive viral adoption and organic growth.
AI is changing the game in consumer tech. If you’re an Israeli founder (based anywhere) building the next big thing in the consumer space, we’d love to talk to you. It’s never too early to get feedback, so get in touch with us via the Remagine Ventures website or reach out to us on social media. Warm intros not a requirement.
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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